Economics Analysis when Chicken food price is going up - Term Paper Example

Download file to see previous pages... The intersection point of the demand and supply curves is called the equilibrium point (Thomas & Maurice 2008).
In the given scenario, there is an increase in the input cost for products made from chicken. The input costs are higher as the chicken feed price goes up. There are certain input costs and the increase in their prices results in a reduction of the supply of the products in which they are used. An increase in input cost causes the supply curve to move towards left. In other words, an increase in input costs reduces the overall profit to the supplier and hence, the supplier reduces the level of supply. The quantity demanded, as a result, does not satisfy and remains unchanged. In our case, the result of an increase in chicken feed prices will reduce the chicken output. Relating this to the Restaurant industry, the reduced supply of chicken will result in higher prices of chicken and eggs related cuisines like Burgers, Omelets, Sandwiches and most of the baked items like cakes. The equilibrium price in the restaurant industry for the foods containing eggs goes up due to the shift in the demand curve. The equilibrium quantity, however, has shown a declining trend.
The increment in feed cost moves the supply curve to the left. The reduced supply of chicken will lead to change in the price and demand of certain products. The price of all products in which chicken is used will go up and the quantity will also be reduced as shown in the figure above.
Assuming Beef as a major substitute to chicken, it is obvious that with the rise in prices of chicken products, the demand for substitutes like beef-made products will rise. The demand curve shifts towards right (Krugman & Wells 2009). The consumer demand to have meat products will then be satisfied by the consumption of beef hence an increase in the demand for beef boosts up.
The poultry industry will definitely be affected adversely due to the rise in ...Download file to see next pagesRead More